Inconsistent VAR regression with common explosive roots

by Peter C. B. Phillips and Tassos Magdalinos

Nielsen (2009) shows that vector autoregression is inconsistent when there are common explosive roots with geometric multiplicity greater than unity. This paper discusses that result, provides a co-explosive system extension and an illustrative example that helps to explain the finding, gives a consistent instrumental variable procedure, and reports some simulations. Some exact limit distribution theory is derived and a useful new reverse martingale central limit theorem is proved.

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Year of publication:	2011
Authors:	Phillips, Peter C. B. ; Magdalinos, Tassos
Publisher:	New Haven, Conn. : Cowles Foundation for Research in Economics, Yale Univ.
Subject:	Schätztheorie \| Estimation theory \| Regressionsanalyse \| Regression analysis \| VAR-Modell \| VAR model

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